IR35 Unfriendly

[malvolio]

Either way - I don't see a problem with IR35. If you behave like a limited firm....you behave like a limited firm.

Look harder. If you choose to work on site because of the nature of the work - you're leading a team, for example, or cannot get efficient external access to their services - then no problem.

However if you have to work onsite irrespective, then big problem and an IR35 issue under the Direction and Control banner.

[ratewhore]

Denny,

Stop moaning, walk away, find a gig that suits what you want. Simple really.

Alternatively, market your business yourself and sign up direct customers under your t's and c's...

Different year - same old tulip!!

[Denny]

Look harder. If you choose to work on site because of the nature of the work - you're leading a team, for example, or cannot get efficient external access to their services - then no problem.

However if you have to work onsite irrespective, then big problem and an IR35 issue under the Direction and Control banner.

Precisely.

[Denny]

Denny,

Stop moaning, walk away, find a gig that suits what you want. Simple really.

Alternatively, market your business yourself and sign up direct customers under your t's and c's...

Different year - same old tulip!!

I just hope you're paying all your taxes on all your income then, minus a poxy 5 percent. So, out of your precious £500 per day you pay employers NI, employees NI, sick, pension, holiday, between contract savings. What's left - practically nothing. It's only a matter of time before Gordo catches up to you if you're paying small salary and divis and then you'll be moaning 'if only I'd taken Denny's advice.'

Don't expect the IR35 insurance to bail you out either. They won't.

[Prodigy]

Sorry for newbie question in here but could someone clarify the following terms for me ?

EB, Back-to-Back and opt in/opt out

Cheers

[Denny]

Sorry for newbie question in here but could someone clarify the following terms for me ?

EB, Back-to-Back and opt in/opt out

Cheers

EB = 'Employment Business' (the legal definition of what most contractors, EB recruiters and clients misrepresent as 'agencies' (EBs are intermediaries that source flexible workers (contractors/temps) for clients whilst claiming they are 'finding us a job.'

Back-to-Back = This refers to the EB to contract terms being mirrored by the EB to client terms so that there are no 'slight meaningless misunderstandings' that don't affect contractors once the role starts (sarcasm here)

You know trivial things like spending a fortune on getting your EB terms checked out for IR35 exemption, signing of terms to start a role fully believing you are outside IR35 and then once the role starts realising that you are not outside IR35 at all, but inside because the working commericial relationship don't reflect the terms you signed with the EB (hence the term 'IR35 friendly, which isn't worth the paper its written on). This of course poses considerable risks to the contractor who has probably paid to set up a limited company, signed up with an expensive accountancy management serviced (like SJD or 1st Accountancy) and then finding out that all that money was in fact wasted because a limited company is an expensive and inefficient vehicle to work through as an IR35 inclusive contractor. By then, it's too late to do anything about it. To put it simply that £400 per day contract you've just been offered will be worth bugger all, once you've taken out two lots of NI contributions, paid full whack of tax on all your income (no divis allowed here) and paid for the accountacy services, solicitor checks, insurances for PII, LLI, IR35 insurance (which of course won't be valid unless you can demonstrate you were really duped by the client during interview about the commercial relationship and even then you would have to leave to make the claim valid), holiday, sick, between contract survival money. In other words the contract is worth around £100 a day if you're lucky.

Opt in/Out = the 'Employment Agency Regulations' that stipulate that all contractors are opted in (entitled to be paid on time even without a timesheet, and can go direct with the client once the contract ends.) Opting out is the paper you sign because deceitful lowlife barrowboys (EBs) claim that their clients insist on it, that it makes you outside IR35. In fact this is a pack of lies. All it means is that they can screw you for money if no timesheet is produced, you have no recourse from the Agencies Inspectorate if you are not paid, and you cannot go direct with the client after the contract ends. The Opt Out papers need to be signed before you are introduced or interviewed by the client - afterwards is too late and has no validity. My advice is to always stay opted in.

[Prodigy]

Cheers Denny, makes perfect sense now!

Sorry to hijack this thread and that, but a couple more questions if I may.

- How do you ensure that the contracts are indeed Back-to-Back ? Being someone that is naturally extremely untrusting of agents (or should I say EBs), how do I check for definite that this is the case ?

- With regard to IR35 status where would I stand on the following. I have been approached one of my previous employers to go back working for them (where I was employed full time a while ago) but this time as a contractor (my choice). Obviously I would have none of the EB bullsh1t to deal with and can pretty much ensure that the contract is IR35 friendly so would this put me firmly outside IR35 or not ? I realise that you are probably going to say there are a number of other factors but I have also read a few posts on here saying that as long as you have a few choice clauses in your contract you are "home and dry". With regard to the other IR35 criteria, I know for a fact that I would not be expected to go into the office 9-5 and would probably conduct 50% of my work from home - although being an IT consultancy this is how most of their permanent staff work anyway. Any pointers appreciated...

[Denny]

Cheers Denny, makes perfect sense now!

Sorry to hijack this thread and that, but a couple more questions if I may.

- How do you ensure that the contracts are indeed Back-to-Back ? Being someone that is naturally extremely untrusting of agents (or should I say EBs), how do I check for definite that this is the case ?

- With regard to IR35 status where would I stand on the following. I have been approached one of my previous employers to go back working for them (where I was employed full time a while ago) but this time as a contractor (my choice). Obviously I would have none of the EB bullsh1t to deal with and can pretty much ensure that the contract is IR35 friendly so would this put me firmly outside IR35 or not ? I realise that you are probably going to say there are a number of other factors but I have also read a few posts on here saying that as long as you have a few choice clauses in your contract you are "home and dry". With regard to the other IR35 criteria, I know for a fact that I would not be expected to go into the office 9-5 and would probably conduct 50% of my work from home - although being an IT consultancy this is how most of their permanent staff work anyway. Any pointers appreciated...

For the sake of being arrogant - but I'll say it anyway - the majority of contractors on this forum talk out of their backside, swallow Thatcherite principles of individuality for breakfast each morning by deluding themselves that they are in business on their own account whilst paying themselves small salaries and large divis whilst acting like de-facto employees on site, and call Blair/Gordon Brown socialists. That's all you need to know.

There are about two or three people on this forum worth reading on this subject - me being the principle one, with Moldovio copying just about everything I've written on the subject and often passing it off as his own. If you want more intelligent commentaries on these subjects do refer to Shout 99. I am a major contributor on there too under the same forum name. I've also been published on this subject, attended contractor government consultations and taken on EB trade associations in print. That should say a lot about my credentials (I hope).

To answer your questions:

The simple answer to no. 1 is to box clever. Most EBs as already correctly stated on this forum actually do want bum on seater temps with no rights whilst the EBs these same clients source to find contractors want us to operate as limited companies. This is fundamentally and ethically wrong for all the reasons I've stated above. In fact, I would go as far as to say that its illegal for any organisation to stipulate by coercion the type of company vehicle a contractor should work to if it is unsuitable, expensive and inefficient. However, this is indeed the case as none of us can in fact work as 'freelancers' (sole traders) which is the natural habitat of one man bands such as ourselves when sourced through EBs (although I have in fact managed this for several years until recently when I decided to go limited).

To box clever, you must try to find out what the EB to contractor terms are (standard terms) before you are put forward for roles. Make sure you know who the client is and ask the EB to state in writing to you that the client to EB contract terms mirror those your terms would stipulate.

At the interview, when you are put forward, tell the client that you work on a B2B basis only but always stress the advantages to them not you for doing so. Make sure you take a copy of the EBs terms with you so that they are made aware of what you are signing with their EB should you be offered the role, to avoid misunderstandings once the role starts.

When you start act as though you are on business on your own account. Study the IR criteria for being outside IR35 and stick to it in practice, but talk to your accountant about anything you think might be dodgy (like being asked to submit holiday and timeout whereabout charts, your personal name being put on company org charts or anythign else that smacks of you being a de-facto part of their organisation. Don't use the company facilities or their equipment if you can help it (and particularly if unnecessary) and try and work to your own hours and at home if possible when it is feasible to get your deliverables out. Don't be pressurised into working under client control and never ever get the EB to stipulate routine office working hours on their contract Works Schedule which itemises the particular terms particular to that specific contract (implied MOO). Make sure your contract (and in practice too) allows you to substitute another for yourself (even if not used in practice) and make sure you are not under client control or supervision. Make sure you get a Schedule of Works (note the difference between this and the Works Schedule mentioned above) drawing up listing your work deliverables over the specified period of the contract.

All of these terms need to be agreed in writing from the EB as discussed with the client for you to safely assume that you are going to be and will be outside IR35 once you start the role. That way you can take out IR35 insurance which will protect you if the IR carry out an investigation and decide to use the client organisation to EB terms (which you won't have seen or negotiated) to argue that you are still inside IR35. In fact, it is what you have agreed with the hiring manager that counts here - those terms you were aware of and discussed before you took the role on. Qdos believe this to be the case, although Sarah at Bauer and Cotterall says differently and believe the higher supply chain contract with the EB that you don't ever get to see counts more. I believe Qdos.

With regards to your second question: no contract with choice clauses in will make you home and dry because of all the points I've made above. The working commercial relationship with the client has to reflect these, not be a bogus sham, otherwise you could be stung - hard. If in doubt you could draw up a confirmation of working arrangements and ask your client to sign it. However, my view is that these COAs over egg the pudding. They are not only threatening to the client who may refuse (not having seen the supply contract to EB terms and may think he is putting his neck on the line puttin something in paper that may contradict the corporate standard on contractor on site working practices). Also, I think they imply that contractors need to 'prove' that they are in business on their own account. If no other bona fide business does this when hooking up with a new client, I fail to see how contractors will be perceived beneficially be artificially re-defining themselves as a business on paper when they are by default anyway! My view is the IR could well make mincemeat out of these because they imply that there is some doubt about the actual status of the contractor.

On your last point: The fact that your client allows their own staff to work from home is of no consequence to you. You are working from your home office because you are in business - it's just that the two look compatible. Make sure that the client understands this though and that you are not being 'permitted' to work from home because the staff are allowed to. However, it is highly likely that the culture of flexi working will make your passage to IR35 exemption with no client control easier as it stands out less than a competing 'under watchful eye' culture. However, it is not the same and the client needs to fully understand this. In fact, you are better of being on site 5 days per week out of your own choosing than being permitted by the client to work from home 5 days per week. The key factor in determining client control is choice not behaviours.

I'll invoice you later.

[cojak]

Study the IR criteria for being outside IR35 and stick to it in practice

I think Denny is referring to the Inland Revenue's Employment Status Manual

[VectraMan]

I think Denny is referring to the Inland Revenue's Employment Status Manual

Okay then, this gives examples of how control over where work is done affects status:

http://www.hmrc.gov.uk/manuals/esmmanual/esm1020.htm

Example 3
Worker C is taken on as a cleaner. The contract requires Worker C to clean an office block 5 evenings each week. The nature of the work dictates where the work has to be carried out. Therefore this factor is of little relevance in determining status in this case.

If you're working on somebody's computer system, then the nature of the work is that you must have access to that system. That gets you out of any D&C from them requiring you to work on site.

Given that most companies have strict computer security policies, they are likely to insist their intellectual property or other confidential information remains on computers that are strictly under their control. So again the nature of the work is that you have to be on site.

The way I read it, if you're a developer (and I am) then you're completely safe from D&C as the influence the client has on your work is negligible compared to the influence you have (i.e. the code you write).